Merkel to visit Greece amid rescue-loan tensions

BERLIN – German Chancellor Angela Merkel will travel to Greece next week for the first time since the debt crisis erupted to meet the country’s prime minister — who warned Friday that Athens will run out of money at the end of November if it doesn’t receive the next part of its bailout loans.

Because Germany has been instrumental in pushing Greece to make austerity cuts in exchange for its bailout loans, Merkel has routinely been the object of anger at public protests in Athens. Her photograph has been manipulated by Greek newspapers to look like a Nazi officer and a prisoner at Guantanamo Bay.

Greek Prime Minister Antonis Samaras said Merkel’s visit on Tuesday was good news. “We will receive her as befits the leader of a great power and a friendly country,” he told reporters in Athens.

But Greece’s main labour unions were swift to call a protest rally outside Parliament on Tuesday against “the neoliberal policies of Mrs. Merkel and the European Union’s core leadership,” and a three-hour work stoppage in Athens to facilitate participation.

The unions said in a statement that “workers, pensioners and unemployed people can take no more of the European Union’s punitive policies.”

A populist conservative party that came fourth in Greece’s June national elections said it would stage a protest outside the German Embassy in Athens on Tuesday evening.

Merkel’s spokesman, Steffen Seibert, was at pains to portray the trip, her first since July 2007, as “a normal visit.” It follows an invitation that Samaras made when he visited Berlin in August.

Seibert underlined Germany’s message that it wants Greece to stay in the euro bloc — but that the Greeks also must push ahead with their painful reforms. Since Greece received its first bailout in May 2010, it has repeatedly slashed incomes, hiked taxes and raised retirement ages.

“We want to help Greece to stabilize itself in the eurozone. We are doing that by contributing massively to the rescue programs that are supposed to help get Greece out of the crisis,” Seibert said.

“This will only be possible with major efforts on the part of the Greeks — we see that there is increased reforming zeal under the Samaras government and we want to support that.”

Merkel has been noncommittal on Greece’s hopes of getting more time to enact reforms and repay its loans, but has rejected talk from some in her centre-right coalition about a possible Greek exit from the 17-nation euro.

Officials from the European Commission, International Monetary Fund and European Central Bank — the so-called “troika” — are currently in Greece assessing the country’s progress in fulfilling the terms for receiving aid.

If their report doesn’t clear the way for the payment of the next C31 billion ($40 billion) tranche of the country’s bailout, Greece could be forced to default on its debts and perhaps leave the euro. It’s unclear when a decision will come.

Asked in an interview with German business daily Handelsblatt how long Greece can hold out without that payment, Samaras was quoted as saying: “Until the end of November. Then the till will be empty.”

Samaras said he’s confident that the money will arrive on time, though he conceded that there are difficulties in negotiations with the troika.

“The troika is demanding above all further cuts to pensions and wages. That is very difficult, because we are already bleeding,” he said. “The existing cuts already go to the bone. We are at the limit of what we can expect of our population.”

Greece is caught in a deep recession, and has unemployment of nearly 25 per cent. On Friday, the country’s statistical authority said the economic contraction in 2010 and 2011 was even worse than earlier thought. It said the economy contracted by 4.9 per cent in 2010, compared to a previous estimate of 3.5 per cent, and 7.1 per cent in 2011, instead of 6.9 per cent.

The revision is expected to push up the country’s debt as a proportion of annual economic output.

The conservative Samaras leads a three-party coalition government that was put together after two elections earlier this year.

“People know that this government means Greece’s last chance,” the prime minister was quoted as saying. “We will make it. If we fail, chaos awaits us.”